<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JULY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________TO___________
COMMISSION FILE NUMBER:1-9135
ALFIN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-3032734
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
720 FIFTH AVENUE, NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 333-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
COMMON STOCK, $.01 PAR ON WHICH REGISTERED
VALUE PER SHARE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO RULE 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANTS KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K/A OR ANY AMENDMENT TO
THIS FORM 10-K/A. (X)
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT, BASED ON THE CLOSING PRICE ON NOVEMBER 26,1997, WAS $2,299,524. AS
OF NOVEMBER 26,1997, THE REGISTRANT HAD 11,787,983 SHARES OF COMMON STOCK
OUTSTANDING.
THE PURPOSE OF THIS FILING IS TO AMEND THE FOLLOWING ITEMS ON THE
COMPANY'S FORM 10-K
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names of each of the directors of the Company
as of November 26, 1997, all of whom are expected to be nominated for reelection
at the Company's next Annual Meeting of the Shareholders of the Company which
is currently scheduled for early 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME AGE DIRECTOR SINCE POSITION WITH THE COMPANY
Elisabeth Fayer 51 November 1992 Chief Executive Officer and
President
Jacques Desjardins 64 November 1992 Director
Steven Korda 57 November 1992 Director
Suzanne Langlois 44 November 1992 Director
</TABLE>
ELISABETH FAYER, a Canadian citizen, was elected as a director of the Company
in November 1992. Mrs. Fayer became the President of the Company in September
1996, and has been serving as Chief Executive Officer since October 1996 when
the acting Chairman of the Board and Chief Executive Officer, Mr. Jean Farat,
resigned from the Company. For more than the past five (5) years, Mrs. Fayer
owned and was President and Chief Executive Officer of Gerbe a major French
hosiery company, and has also partially owned and managed various French
fragrance and cosmetic companies including the world famous fashion house of
Pierre Balmain.
JACQUES DESJARDINS, a Canadian citizen, was elected as a director of the
Company in November 1992 and has for more than the past five (5) years been
engaged in private practice as a general legal advisor (a notary and title
attorney) in Montreal, Quebec, Canada.
STEVEN KORDA, a Canadian citizen, was elected as a director of the Company in
November 1992 and has for more than the past five (5) years been the principal
of Korda & Associates, a law firm located in Montreal, Quebec, Canada, engaged
in the general and commercial practice of law.
SUZANNE LANGLOIS, a Canadian citizen, was elected as a director of the Company
in November 1992 and has been legal counsel to Zanimob Distributions, Inc., a
privately owned Canadian corporation from 1981 to the present.
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EXECUTIVE OFFICERS
Set forth below is certain information, as of November 26, 1997 regarding the
executive officers of the Company:
<TABLE>
<CAPTION>
POSITION WITH EXECUTIVE OFFICER
NAME AGE THE COMPANY SINCE
<S> <C> <C> <C>
Elisabeth Fayer 51 Chief Executive Officer and September 1996
President
Mary Panvini 50 Senior Vice President/ June 1997
General Manager - Retail Sales
Michael D. Ficke 42 Vice President, Chief
Financial Officer and
Secretary July 1989
</TABLE>
Information with respect to ELISABETH FAYER is set forth under "Directors."
MARY PANVINI has been the Senior Vice President/General Manger of Retail Sales
of the company since June 1997. Prior to her joining the Company, Ms. Panvini
acted as an independent health and exercise consultant for two years. Prior to
serving as an independent health and exercise consultant Ms. Panvini served as a
Regional Sales Director with Christian Dior Perfumes.
MICHAEL D. FICKE joined the Company in July 1989. Mr. Ficke served Alfin, Inc.
as Corporate Controller from July 1989 until his promotion to Vice President and
Chief Financial Officer in November, 1993. Prior to joining the Company, from
1977 to 1989, Mr. Ficke, a C.P.A. served as Assistant Controller of Chanel Inc.,
a manufacturer and distributor of fragrance and cosmetic products.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended July 31,
1997, 1996 and 1995 with respect to all compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and its other executive officers
who earned in excess of $100,000 for fiscal 1997 (the "Named Executive
Officers") in all capacities in which such officers served.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------------------- ------------
Name and Principal Position Year Salary Bonus Other Annual Stock Option/
Compensation Warrants
Compensation
Awards
<S> <C> <C> <C> <C> <C>
Elisabeth Fayer, (1) 1997 $ 574,167 $ -0- $ -0- (2) -0-
Chairman and Chief 1996 290,000 -0- -0- (2) -0-
Executive Officer 1995 114,500 -0- -0- (2) 100,000
Adrienne Newman (3) 1997 $ -0- $ 93,750(4) $ 22,500 (5) -0-
President and Chief 1996 250,000 3,448,105(4) 65,000 (5) -0-
Executive Officer 1995 250,000 3,374,990(4) 65,000 (5) -0-
of Adrien Arpel, Inc.
Michael D. Ficke 1997 $ 123,533 $ -0- $ -0- (2) -0-
Vice President, 1996 96,500 5,000 -0- (2) -0-
Chief Financial Officer, 1995 93,000 -0- -0- (2) -0-
Secretary
Jo Ann Segal(6)
Senior Vice President
and General Manager 1997 $ 135,938 $ -0- $ -0- (2) 25,000
1996 -0- -0- -0- (2) -0-
1995 -0- -0- -0- (2) -0-
</TABLE>
(1) Named President of the Company in September 1996 and became Chief Executive
Officer on October 23, 1996.
(2) Excludes personal benefits which did not exceed the lesser of $50,000 or
10%, on an annual basis, of such officer's salary and bonus.
(3) Terminated her employment agreement, whereby she served as President and
Chief Executive Officer of the Company's wholly-owned subsidiary, Adrien
Arpel, Inc., on October 28, 1996. See "Executive Compensation -
Compensation Arrangement".
(4) Commissions paid based on 1/3 of the revenues, net of direct expenses,
derived from television shopping sales of cosmetics.
(5) Represents a non-accountable yearly expense allowance of $65,000.
(6) Terminated as of June 6, 1997.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
During fiscal 1997, no new options were granted to the Named Executive
Officers.
OPTIONS EXERCISED AND FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth information at July 31, 1997, respecting
exercisable and non-exercisable options held by the Named Executive Officers.
The table also includes the value of "in-the-money" options which represents the
spread between the exercise price of the existing stock options and the year-end
price of the Common Stock. None of the Named Executive Officers exercised any
options during fiscal 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS HELD AT HELD AT
JULY 31, 1997 JULY 31, 1997 (3)
------------- -----------------
NOT NOT
NAME EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C>
Adrienne Newman (1) 625,000 -0- $ -0- $ -0-
Elisabeth Fayer (2) 100,000 -0- $ -0- $ -0-
</TABLE>
(1) 1,000,000 Warrants granted on November 19, 1993 at $1.25 per share
(2) 100,000 options granted April 28, 1995 at $1.00
(3) Based on a July 31, 1997 closing price of $0.625
COMPENSATION ARRANGEMENTS
Ms. Adrienne Newman was employed as the President and Chief Executive Officer
of the Company's sholly-owned subsidiary, Adrien Arpel, Inc. pursuant to an
employment agreement with the Company dated as of April 4, 1990 as amended
November 18, 1991 and November 19, 1993 (such agreement as amended is the
"Employment Agreement"). The Employment Agreement terminated on the earliest to
occur of (i) April 4, 1998, (ii) the last day of any month in which Ms. Newman
died, (iii) the last day of the month in which the Company elected to terminate
Ms. Newman's employment due to a physical or mental disability, (iv) the
termination by the Company of Ms. Newman's employment for "good cause" as
therein defined, and (v) the termination of the Company's television marketing
efforts after April 4, 1995. The Employment Agreement provided for salary,
fringe benefits and commission payments based upon 33% of the revenues, net of
direct expenses, attributable to television shopping sales. Ms. Newman, who
served as the selling host under the name Adrien Arpel, in the Company's sales
program on the Home Shopping Network, Inc. ("HSN"), also has vested rights in
625,000 warrants, 500,000 of which were scheduled to expire on November 19,
1998, and the remaining 125,000 of which were scheduled to expire on July 31,
2001.
On October 28, 1996 the Company received notice from Adrienne Newman purporting
to terminate her Employment Agreement with the Company based on an alleged
breach of the Employment Agreement by the Company. On November 8, 1996 the
Company and Adrienne Newman reached an agreement (the "Interim Agreement")
whereby Ms. Newman agreed to appear as the selling host for Adrien Arpel on HSN
shows scheduled for November and December 1996 and January 1997 (the "HSN"
Selling Period"). During the HSN Selling Period, Ms. Newman acted as an
independent contractor and not as an employee of the Company. The Company and
Ms. Newman also agreed to refrain from initiating legal action against the
other in connection with their dispute over Ms. Newman's termination of the
Employment Agreement until after the expiration of the HSN Selling Period.
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On January 28, 1997, after the expiration of the HSN Selling Period, the Company
was served by Adrienne Newman with a summons and complaint returnable in the
Supreme Court, New York County whereby Ms. Newman asserted claims for damages
against the Company based upon alleged breaches by the Company of Ms. Newman's
Employment Agreement and the Interim Agreement. Unspecified damages were
claimed. A further claim requested a judicial determination that the Employment
Agreement was materially breached by the Company resulting in its termination.
On March 19, 1997 the Company served an Answer and Counterclaim in response to
the action commenced by Ms. Newman. The Company's Counterclaim asserts various
claims against Ms. Newman, seeking damages and injunctive relief. Among other
things, the Company claimed that Ms. Newman was in material breach
of her Employment Agreement when she terminated the Employment Agreement on
October 28, 1996. As a consequence, it is the Company's belief that Ms. Newman's
refusal to provide services to the Company throughout the term of her Employment
Agreement which expires in April 1998, particularly her willful refusal and
failure to appear as the Company's selling host on HSN, will damage the Company
in the sum of at least eleven million dollars ($11,000,000). The Company also
asserted claims against Ms. Newman for breaches of her covenant not to compete
and her covenant not to disclose trade secrets and proprietary data.
During May 1997, Ms. Newman started appearing on HSN as a representative of her
own company selling cosmetic products under the name "Signature Club A". Ms.
Newman has subsequently appeared on HSN on a monthly basis. The Company and its
attorneys are currently reviewing these appearances and may seek further legal
remedies and actions against Ms. Newman. During these appearances Ms. Newman was
not acting on behalf of the Company or its trademark protected Adrien Arpel
product line.
The case is currently in the discovery phase. Upon completion of discovery the
action will be ready for trial but no trial date has yet been fixed.
Under the terms of the Employment Agreement, Ms. Newman served as Executive
Vice President of the Company and President and Chief Executive Officer of
ARPEL at an annual base salary of $250,000. The Employment Agreement also
provided for a non-accountable expense allowance of $65,000 per year, and
prohibited Ms. Newman, during its term, from engaging or being interested in
any business which operated leased beauty cosmetic departments or concessions
in stores, or which acted as a direct vendor of or advisor with respect to
cosmetics or facial services to any store which was a member of a retail group
with which the Company engaged in business at the time Ms. Newman's employment
terminated, or which was competitive with the business activities of a business
which was using the "Adrien Arpel" name and trademark under license from ARPEL
at the time Ms. Newman's employment with the Company was terminated.
In September, 1991, the Company entered into an incentive compensation plan
agreement with Ms. Newman pursuant to which she was entitled to be paid an
annual bonus based on 11% of the annual pre-tax profits (as defined in the
Employment Agreement) of ARPEL, for each fiscal year during her employment
from August 1, 1991 through July 31, 1994. No bonus compensation was earned for
fiscal 1994 since there were no pre-tax profits as calculated. Ms. Newman was
also entitled to receive 1/3 of the revenues, net of direct expenses, from
television sales of cosmetics. For fiscal 1995 and 1996, and 1997 she received
$3,448,105, $3,374,990 and $986,488 respectively from such revenues.
5
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Ms. Langlois has been providing consulting services to the Company at a rate of
$9,600 per annum, commencing in December 1992. This was increased to $16,800
per annum effective November 1, 1994. These services consist of legal advice on
contract matters as requested by the Company, from time to time are not full
time and may be terminated by the Company at will. There is no written
agreement between the Company and Ms. Langlois.
Mrs. Fayer was retained to provide consulting services to the Company and
Adrien Arpel, Inc. commencing November 1, 1994 at an annual rate of $84,000.
This was increased to $290,000 per annum effective May 1, 1995 and to $600,000
per annum effective September 1, 1996. During September 1996, Mrs. Fayer was
named President of the Company and she has been serving as Chief Executive
Officer since October 1996 when the acting Chairman of the Board and Chief
Executive Officer, Mr. Jean Farat resigned from the Company. Mrs. Fayer is
responsible for overseeing the management of the Company. There is no written
agreement between the Company and Mrs. Fayer.
Ms. Jo Ann Segal was employed as Seniore Vice President/General Manager of the
Company pursuant to an employment agreement dated October 23, 1996. This
agreement terminated on the earliest to occur of (i) October 27, 1997 or (ii)
the termination of Ms. Segal's employment for "cause", as therein defined.
During June 1997 the Company terminated Ms. Segal for "cause". Ms. Segal
received an annual base salary of $225,000, plus certain benefits which did not
exceed 10% of her annual compensation. Ms. Segal also received stock options
for 25,000 shares of the Company's Common Stock valued at the closing price on
the date of the grant with options for 10,000 shares becoming fully exercisable
on the one year anniversary of her employment with the Company and the
remaining options for 15,000 shares becoming fully exercisable on the two year
anniversary of her employment with the Company.
Ms. Mary Panvini serves as Senior Vice President/General Manager of retail
sales of the Company at an annual base salary of $115,000 plus certain benefits
which exceed 10% of her annual compensation. These benefits consist of an
apartment lease during Ms. Panvini's employment to the Company. There is no
written employment agreement between the Company and Ms. Panvini.
Ms. Michele Mas was employed pursuant to an employment agreement dated November
1, 1996. This agreement was to terminate on the earliest to occur of (i)
November 1, 1998 and (ii) the termination of Ms. Mas' employment for "cause",
as therein defined. Ms. Mas served as Vice President/Marketing of the Company
at an annual base salary of $144,000, plus certain benefits which do not exceed
10% of her compensation. Ms. Mas also received stock options for 25,000 shares
of the Company's Common Stock, valued at the closing price on the date of
such grant, with options for 10,000 shares becoming fully exercisable after she
is employed by the Company for a period of one year and options for the
remaining 15,000 shares becoming fully exercisable after she is employed by the
Company for a period of two years. During June 1997, Ms. Mas and the Company
agreed to terminate the employment agreement.
Mr. Ficke is currently earning $125,000 per annum. There is at this time no
written employment agreement between the Company and Mr. Ficke.
COMPENSATION FOR SERVICE AS DIRECTOR
Each Director who was not also an officer or employee of the Company (Messrs.
Desjardins and Korda for fiscal 1997) received $650 for each Board of Directors
or Committee meeting attended by such Director or $200 for each meeting in
which such Director participated by telephonic conference. Directors who are
also officers or employees of the Company receive no additional compensation
for attendance or participation at Board of Directors or Committee meetings.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mrs. Fayer, who is currently serving as the President and Chief Executive
Officer of the Company determined the compensation for the Officers and
employees of the Company for the Company's fiscal year ended July 31, 1997 Mrs.
Fayer was not involved in the determination of her compensation as the Chief
Executive Officer. Mrs Fayer's compensation was determined by the Company's
Board of Directors.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The Following table sets forth certain information as of November 26, 1997,
regarding, (i) the share ownership of the Company by each person who is known
to the Company to be the record or beneficial owner of more than five percent
(5%) of the Company's outstanding Common Stock, (ii) the share ownership of the
Company of each director, (iii) the share ownership of the Company of the Chief
Executive Officer and each of the other most highly paid executive officers of
the company who earned in excess of $100,000 during the Company's last fiscal
year, (the "Named Executives") and (iv) the share ownership of the Company of
all directors of the Company and Named Executives as a group.
<TABLE>
<CAPTION>
Name and Address Amount of Common Stock Percent
of Beneficial Owner Beneficially Owned of Class(1)
- ------------------- ------------------ -----------
<S> <C> <C> <C>
Elisabeth Fayer, 7,288,935 (2) 61.8
Jacques Desjardins 100,000 *
Steven Korda 66,667 *
Suzanne Langlois 100,000 *
Adrienne Newman(3) 625,000 (4) 5.0
Michael Ficke -0- *
JoAnn Segal -0- *
All Directors and Executive Officers
as a Group (8 Persons) 8,180,602 65.4
</TABLE>
* Less than 1%
(1) For purposes of computing these percentages, shares not outstanding but
beneficially held through contract rights, stock options or warrants
exercisable within 60 days from the date hereof are deemed outstanding with
respect to such individuals. Based upon 11,787,983 shares of Common Stock
outstanding on November 26, 1997.
(2) Includes 7,188,935 shares of Common Stock which are owned of record by
Fine Fragrances Distribution, Inc ("FFD") a wholly-owned subsidiary of
3143040 Canada, Inc. of which Elisabeth Fayer is the sole owner. Elisabeth
Fayer, through 3143040 Canada Inc. has sole investment and voting discretion
with respect to all of such shares.
(3) Terminated her Employment Agreement whereby she served as President and
Chief Executive Officer of the Company's wholly-owned subsidiary, Adrien
Arpel, Inc., on October 28, 1996.
(4) Represents 625,000 shares of Common Stock issuable upon exercise of
warrants. Such warrants are fully vested and have an exercise price of $1.25
per share. 500,000 of such warrants expire on November 19, 1998 and 125,000
of such warrants expire on July 31, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALFIN, INC.
(Registrant)
Dated: December 1, 1997 By: Elisabeth Fayer
--------------------------------------
Elisabeth Fayer
Chief Executive Officer, President
Dated: December 1, 1997 By: Michael D. Ficke
--------------------------------------
Michael D. Ficke
Secretary, Chief Financial Officer
